Can anything stop the euro's decline?
With the single currency facing the biggest crisis of its existence, European governments this month thrashed out a $1 trillion bailout for struggling member states.
Market reaction was cool; the euro sank this week to a four-year low against the dollar before recovering somewhat, and European stock markets have taken a battering.
On Friday, after another round of tense meetings, European Union finance ministers promised new punishments for countries like Greece that threaten the continent's solvency with fiscal imbalance.
But many fear this will be too little to end the crisis. If hundreds of billions of euros in loan guarantees failed to stabilize markets, it appears unlikely that the prospect of a lengthy EU move toward fiscal reform will do the trick.
"The markets are trading in real time, while the politicians are moving in bureaucratic time," said Mark Cliffe, chief economist at ING Group. "We're promised something maybe in October — that's a hell of a long time in the financial markets' eyes."
The EU's woes, triggered by Greece's admission last October that it was sitting on a destabilizing 12.7 percent budget deficit, have shattered confidence in the euro, which has lost about 20 percent of its value in recent months.
While the markets responded with immediate alarm, euro zone leaders struggled to agree on a rescue package. Many in northern European countries like Germany resented having to pay for what they saw as the profligacy of other member states.
Late Friday, European finance ministers backed the tough-sounding idea of sanctions against countries that run up too much debt. But it was unclear how severe they would be, or how quickly they could be introduced.
EU leaders are due to decide on long-term reforms at an October summit.
There's little time for another bout of hand wringing, after months of EU dithering over the bailout package contributed to market unease.
The European crisis is both a continuation and an extension of the financial and economic turmoil that has ravaged much of the world over the last three years.
But whereas China is now raising growth predictions, and the U.S. Congress is moving ahead with reforms of Wall Street, European governments are mired in debate over how to regulate themselves. The concern is universal because a euro zone plunge back into recession could slow the recovery elsewhere.
European stock markets stabilized somewhat Friday after the German parliament approved the bailout plan — to which it is the largest contributor. France is due to vote on the euro zone bailout by May 31 but neither Spain nor Italy has set a deadline to authorize it.
And investors remain unconvinced that indebted euro zone governments will be able to pay their debts. Those fears have sent the prices of government bonds plummeting, and many of them are held by big banks in Germany and France whose losses could set off a new credit crisis.
Still, the EU has beaten the odds before. The bloc has survived numerous soul-searching setbacks in its integration process over the last decade, which it hoped to end with last year's Lisbon Treaty.
Cliffe said he saw some hope in the EU's efforts to "get everyone on the same track," especially the agreement on a 750 billion euros ($937 billion) package of cash and state loan guarantees to protect euro zone countries with troubled finances from bankruptcy.
Cliffe said that package "was a smart move, the first time they've got ahead of the curve."
"The markets have been concerned about unilateral action and a lack of solidarity," he said.
In the longer term, some observers fear the EU faces an identity crisis. The push for greater integration has recently stalled.
"No" votes in Dutch, French and Irish referenda over the past decade have shown that there is a growing divide between European officialdom and citizenry on defining the kind of bloc they want to live in.
The current threat is that while Brussels asks governments to grant it more teeth, its role in ensuring economic stability remains unclear. It may end up meaning rules and regulations for northern Europe, but only a source of subsidies for the south — a sure recipe for discontent.
"The euro zone cannot survive as it is at the moment," historian Timothy Garton Ash told BBC radio. "Either it goes forward to become something more like a fiscal union, or some of the weaker, as it were Club Med member states, will in effect default inside it."
Leon Brittan, a former European Commission vice president, agreed that the "shock and awe" rescue package needed to be accompanied by stricter national spending controls. But he was skeptical that Europe was ready to enforce its rules.
"Whether there is a real willingness to accept that discipline — for example to have sanctions if your budget deficit goes up too much — remains to be seen," he said.
"Let's not forget that when agreement was reached that there should be limitations on budget deficits, the first to break it were not some of weaker brethren as it were, but France and Germany," he said, referring to the EU's 1997 Stability and Growth Pact.
That accord was relaxed in 2005 after France, Germany and others violated the provisions.
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